Former Ontrak CEO sentenced to prison for $12.5M insider trading scheme

Former CEO of Ontrak, Terren Scott Peizer, has been sentenced to three and a half years in federal prison for participating in an insider trading scheme that allowed him to evade losses of over $12.5 million. The sentence, declared by U.S. District Judge Dale S. Fischer, also includes a $5.2 million fine and a mandate to pay $12.7 million in restitution.

Peizer, 65, who resides in Puerto Rico and Santa Monica, was found guilty in June 2024 on one count of securities fraud and two counts of insider trading after a 10-day jury trial.

According to federal prosecutors, Peizer manipulated Rule 10b5-1 trading plans, which are created to offer legal protection to executives conducting pre-scheduled stock sales, to sell Ontrak shares based on undisclosed information. Specifically, Peizer took action while being aware that Ontrak’s primary client was likely to end its contract, resulting in a significant drop in the company’s stock price.

Peizer’s actions were scrutinized for violating the intended protection of Rule 10b5-1. Despite these plans being designed to safeguard executives from insider trading accusations when established in good faith and without access to confidential data, Peizer purportedly created plans to sidestep these stipulations.

He devised two distinct trading plans in May and August 2021 after acquiring significant details about the foreseen contract termination. Disregarding legal counsel and warnings from brokers and executives, Peizer proceeded to trade without observing any “cooling-off” period.

Shortly after executing his second plan, Ontrak announced the contract termination publicly, leading to a more than 44% decline in the company’s stock value.

The Justice Department views this case as part of a wider data-driven initiative to curb corporate executives misusing 10b5-1 plans. U.S. Attorney Bill Essayli emphasized that such fraudulent acts “undermine market integrity” and cautioned that individuals involved in fraud will be subject to prison sentences.

Matthew R. Galeotti of the DOJ’s Criminal Division added that Peizer’s conviction “reflects the Criminal Division’s dedication to prosecuting frauds that harm American investors.”

The investigation was carried out by the FBI, with assistance from FINRA’s Criminal Prosecution Assistance Group. Assistant U.S. Attorney Jonathan S. Galatzan also conducted forfeiture proceedings jointly with DOJ Fraud Section attorney Matthew Reilly.